Our First Peek at Trump’s Aid Budget: Big Changes, but Will Congress Play Along?

After months of speculation inside the foreign aid community, President Trump’s vision for development assistance is coming into clearer focus. Foreign Policy this week published a leaked copy of an Administration planning document on the FY2018 foreign aid budget request. The bottom line: less aid, done less effectively. Here are a few major takeaways from the document:

Big cuts—and false economies

While a small handful of countries see net increases in the document (most notably Iraq, which stands to get an additional $177.5 million), the big story of this budget is cuts. Former senior Office of Management and Budget official Jonathan Lachman has done a handy chart illustrating how different regions fare in this budget, and all take a substantial hit. Africa stands to lose at least three quarters of a billion, and Europe/Eurasia, South/Central Asia, and the Western hemisphere all face reductions approaching half a billion dollars apiece. The US Agency for International Development AID’s Global Health, Food Security, and Education programs would all be slated for big cuts as well.

Cuts on this scale are draconian, but they also set up quite a few false economies. The biggest is the massive reduction to USAID’s Bureau for Food Security (BFS), which would lose two thirds of its funding under this plan. BFS works to reduce global hunger and build countries’ resilience to major food crises and famines. Gutting these functions may save pennies today, but will cost dollars tomorrow—when lower food production and higher vulnerability lead to hunger crises that require (far more expensive) humanitarian food aid responses.

On the global health front, the draft proposal cuts US funding by roughly a quarter.  PEPFAR would take a (comparatively) modest hit, but the heaviest cuts target USAID health programs—the kind that fight malaria and infectious disease, support reproductive and children’s health, and build stronger national health systems.  These are directly life-saving programs, and cutting them by 60 percent would—let’s not sugarcoat here—kill people.  That’s bad enough, but there’s big false economy buried in here as well.  When I worked at USAID, we built much of the Ebola response in West Africa on the health program infrastructure of the USAID missions there.  Rolling back this programming leaves countries weaker and more vulnerable to disease outbreaks—and makes the US that much more vulnerable as well.

But there is more—the budget would nearly eliminate funding for the USAID Global Development Lab, which serves as USAID’s hub for innovation and private sector engagement. Saving this $90 million would put at risk USAID’s existing strategic partnerships with the private sector—which are mobilizing $1.3 billion of non-USG development investment. 

Less development, more politics

This budget also seeks a major shift in how the United States would provide bilateral economic assistance—one guided more by immediate diplomatic policy goals than by durable development outcomes. The budget proposes de-funding the Development Assistance (DA) account and shifting all development assistance into the Economic Support Fund (ESF) account. Why does this matter?

Congress established the DA account to fund programs with an explicitly developmental objective. These funds, administered by USAID, align with broad US foreign policy goals but are not intended as a tool to advance near term diplomatic or political objectives. Indeed, DA is designed as an explicit counterpoint to the notion that foreign aid equals wasteful payoffs to corrupt governments—it cannot be used in that way. ESF, on the other hand, is controlled by the State Department and is intended to directly promote US political or economic interests. It can be used far more flexibly, and so will often be oriented toward the Secretary’s immediate diplomatic goals. The two accounts provide distinct and complementary foreign policy tools.

In practice, the goals of DA and ESF can sometimes align, and a balance of ESF and DA development programming can be highly effective.  However, an imbalanced approach is dangerous. The approach in this draft is tantamount to saying the United States will no longer invest in global development as a foreign policy objective.  There are other risks here too.  An ESF-centric program portfolio that prioritizes near-term political interests over viable development strategies can also lead to ineffectiveness and waste.  The most extreme examples of this are Afghanistan, Pakistan, and Iraq, where State’s diplomats have at times pressed USAID into programs that advance a political interest but are programmatically ineffective. The results, often, have been serious boondoggles. Shifting to an ESF-only development budget risks expanding that dynamic worldwide.

Reducing the aid footprint—but on what rationale?

Given the false economies and the apparent prioritization of diplomatic and political objectives—what is the underlying strategic rationale here? At CGD we have been combing through the data to see what narrative emerges—and, in particular, which parts of the budget would sustain the most pain. The first map below shows the country-level cuts in absolute terms:

This second map shows how that shakes out proportionally relative to FY2016 funding:

And this final map shows the impact relative to all Official Development Assistance receipts to the countries:

What stands out?  One target seems to be small programs—nearly all of the zeroed-out countries were places with $10 million or less in programming in FY2016. If so, that suggests a possible rationale—but not necessarily a strategic one. While the leaked country-level figures include DA, ESF, global health accounts managed by State and USAID, as well as the lesser-known Assistance for Europe, Eurasia and Central Asia, they do not capture significant funding that flows through centrally-funded programming (i.e. through the Bureau for Food Security, the Global Health Bureau, education programming, humanitarian funding, etc). So at first blush it might seem reasonable, for example, to cut the $2 million in Development Assistance for Niger. But if (as a visit to USAID’s funding dashboard suggests) that $2 million was an important strategic complement to a broader portfolio of other USAID food security, humanitarian, and stabilization funding—zeroing it out suddenly looks short-sighted.

A few other things jump out—particularly Ukraine. US assistance there would drop by nearly 70 percent, which would remove a quarter of the country’s aid inflows. And more generally, the countries of the former Soviet Union take disproportionate hits, with Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, and Turkmenistan facing cuts of 50-100 percent and Georgia, Moldova, and Tajikistan facing cuts of over 40 percent (only Uzbekistan gets off lightly, with a modest 4 percent cut).

Another of the worst-hit countries is Jordan, which is puzzling, as Jordan is a major US security partner and a lynchpin of development and humanitarian activities in the Middle East. It takes a 22 percent budget hit.

What happens to results and accountability?

Finally, this budget appears to shift responsibility for oversight and allocation of funds heavily toward the State Department, with USAID in, at best, an implementation role. This is problematic because it would separate the government’s aid strategy decisions—which would sit at State—from its aid evaluation and program management capacity—which sits at USAID.  Neither would be fully responsible or accountable for success.  Bifurcating that accountability across two institutions would make for less-informed decisions about program strategy and reduce accountability for results. USAID as an institution is set up to design and administer big aid programs—the State Department is not. Shifting these funds and functions toward State would be a bit like putting the army in charge of building aircraft carriers. After years of bipartisan focus on results and accountability in foreign assistance, all of these elements would be a big step backward. At the same time, the budget document envisions steep cuts to USAID’s Policy, Planning, and Learning Bureau—which serves as the government’s hub for aid program planning and evaluation. This will result in programs that are planned, designed, monitored, and evaluated with less rigor.  The PPL Bureau also leads USAID’s donor engagement—cutting this will make it harder for USAID to deliver on the White House’s stated goal of pressing other donors to cover gaps as US aid declines.

The $5 billion question is: how will Congress engage with this vision when it comes time to write the FY18 budget and appropriations bills? We won’t know for sure until we begin seeing Congressional spending allocations, but a few aspects of this document look ripe for Congressional pushback. Congressional appropriators tend to like clear definitions around account functions, and dislike giving wide flexibility to the Executive Branch. So a wholesale shift from DA to ESF will likely face skepticism. Congress is also unlikely to support the steep cuts to food security programming, given the wide bipartisan support for these programs expressed in the passage of the Global Food Security Act last year. And I would expect pushback as well on cuts that would diminish USAID’s ability to evaluate impact and ensure accountability for results--especially given the bipartisan coalition that pushed the Foreign Aid Transparency and Accountability Act over the finish line last year.

Thanks to Jared Kalow for creating the interactive maps.